Hudson City Savings accused of discrimination

By Hugh Bailey

Updated
5:40 pm EDT, Thursday, September 24, 2015

A Hudson City Savings Bank sign on Putnam Avenue in Greenwich. The bank was fined $5.5. million and ordered to grant $27 million in loans to minorities after it discriminated against black and Hispanic neighborhoods by denying fair access to mortgages, federal officials said on Thursday. less

A Hudson City Savings Bank sign on Putnam Avenue in Greenwich. The bank was fined $5.5. million and ordered to grant $27 million in loans to minorities after it discriminated against black and Hispanic ... more

A Hudson City Savings Bank sign on Putnam Avenue in Greenwich. The bank was fined $5.5. million and ordered to grant $27 million in loans to minorities after it discriminated against black and Hispanic neighborhoods by denying fair access to mortgages, federal officials said on Thursday. less

A Hudson City Savings Bank sign on Putnam Avenue in Greenwich. The bank was fined $5.5. million and ordered to grant $27 million in loans to minorities after it discriminated against black and Hispanic ... more

Hudson City Savings Bank, which has several branches in Fairfield County, discriminated against black and Hispanic neighborhoods by denying fair access to mortgages, according to a consent agreement reached with federal officials.

If the proposed consent order is approved by the court, Hudson City will dole out $25 million in direct loan subsidies to qualified borrowers in the affected communities, $2.25 million for community programs and outreach and pay a $5.5 million penalty.

By agreeing to the consent order, Paramus, N.J.-based Hudson City does not admit or deny the allegations. The resolution represents the Justice Department’s largest residential mortgage redlining settlement in its history.

“We allege that Hudson City’s redlining practices illegally cut off opportunities for consumers in predominantly black and Hispanic neighborhoods to get a mortgage and achieve the dream of homeownership,” said Richard Cordray, director of the Consumer Financial Protection Bureau. “Without access to affordable credit, neighborhoods deteriorate in the long shadow cast by unfair lending.”

Hudson City is a federally chartered savings association with 135 branches and assets of $35.4 billion. The bank has local branches in Fairfield, Stamford, Darien, Bethel, Brookfield, Norwalk, Ridgefield, Monroe and the Cos Cob section of Greenwich.

The complaint alleges that Hudson City avoided locating branches and loan officers and using mortgage brokers in majority black and Hispanic communities.

Between 2009 and 2014, according to the court complaint, Hudson City drew 8,011 mortgage loan applications in the Bridgeport region, of which 132, or 1.6 percent, were from majority black and Hispanic areas, even though 24.6 percent of the area’s tracts fit those categories.

At the same time, other banks generated 7.6 percent of their applications from such neighborhoods, more than four and a half times that of Hudson City.

“A lending institution must treat all potential borrowers equally, regardless of their race or the racial composition of their neighborhood, when deciding to offer its loan services,” said Vanita Gupta, head of the Justice Department’s Civil Rights Division. “We encourage all lenders to proactively identify responsible lending opportunities that exist in predominantly minority neighborhoods within their lending areas.”

The practice of systematically excluding minority neighborhoods from access to banking services is known as redlining, and dates to the 1930s, when maps were marked by colors designating where services would not be offered. Federal officials on Thursday said a number of ongoing investigations are targeting the practice at a variety of lending institutions.

“Redlining is not a vestige of the past,” Gupta said.

The consent order requires Hudson City to pay $25 million to a loan subsidy program that will offer residents in affected neighborhoods mortgage loans on a more affordable basis than otherwise available from Hudson City. The subsidies can include interest-rate reductions, closing cost assistance and help with a down payment.

“At the core of this case is a pretty simple story,” said Paul Fishman, U.S. Attorney for the District of New Jersey. “Hudson City took steps to illegally avoid serving neighborhoods that were predominantly black and Hispanic.”

Fishman said Hudson City served areas around Camden N.J., but not the city itself. “They effectively drew a red line around the city of Camden itself.”